Argentina Economic Outlook. October 2022

Summary

With a better than expected 2022, Argentina will face a complex 2023, with a drop in the level of activity and high inflation that will lead to a stagflation scenario. The main challenges will be the rollover of debt in the local market for challenging amounts and the vulnerability of the FX rate scheme.

Key points

• Key points:
• Argentina received a disbursement of USD 3.8 bn, following the approval of the second program review (2Q22) by the IMF, despite not having met the reserves target. Doubts persist regarding the achievement of goals by the end of 2022.
• The acceleration of inflation prompted the CB to raise rates from 52% to 75%, a stronger monetary tightening than expected. Inflation will reach 97% in 2022 and 105% in 2023.
• The implementation of the "soybean dollar" allowed record settlements in September. It is followed by differential FX rates for credit card consumption in dollars, including tourism, luxury goods, etc., installing a multiple FX rate scheme.
• The primary deficit will be 2.8% of GDP in 2022 and 2.5% of GDP in 2023. Fiscal announcements are insufficient to meet the target, particularly the next year because the presidential elections will imply more spending.
• We revise up our GDP forecast for 2022 (from 2.5% to 4%) due to better than expected data in 2Q but maintain the contraction scenario for 2023 (-1.0%).

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